From the streets of Dublin to the Ring of Kerry, Ireland has a rich and cultural history spanning thousands of years. However, looking at its progress in the 21st Century so far, the luck of the Irish has prevailed in the financial sphere.
After the 2008 financial crisis, Ireland experienced significant growth; a rise in total fund asset services, funds and sub-funds which continues to grow from strength to strength.
According to Padraig Kenny, managing director, Ireland at RBC Investor and Treasury Services, Ireland is, and will continue to be, “the location of choice within the European Funds Industry with close to €4 trillion of domiciled and non-domiciled assets under administration”.
Ireland’s prominence in the asset servicing world is an envy to many other hubs across the globe, with many businesses moving to Dublin and other Irish cities in recent years.
Paul Kilcullen, head of custody and fund services at Citi Ireland, states: “Ireland is a leading location for the asset servicing industry with over 16,000 employed and around 14,000 funds under administration.”
Rachel Turner, Europe, the Middle East and Africa (EMEA), head of investment managers and insurance at BNY Mellon asset servicing, describes Ireland as a “significant centre for two growth industries: technology and financial services. That’s a perfect combination for creating the right skillset and dynamic environment for developing solutions to drive efficiency and enhanced client service across the investment industry”.
But, with UK Prime Minister, Boris Johnson, heading toward a no-deal Brexit scenario, there has been much debate over whether Brexit will bring opportunities or challenges in regard to Ireland’s financial outlook, as well as the rest of Europe.
Whether you are an asset manager or an asset servicer, the uncertainty surrounding Brexit has and continues to be a troublesome aspect for industry participants, not to mention the political hardships it has brought to the fore.
Brexit
Like the UK, Ireland stands on a cliff-edge with Brexit with both having the potential to suffer as a result.
Padraig Kenny, managing director, Ireland at RBC Investor and Treasury Services, cites: “From a fund industry standpoint, Dublin has been able to provide the UK and other international asset managers a means to ensure minimum disruption in the event that Brexit reduces their ability to access European markets.”
“Ireland has been domicile of choice for many international asset managers well before Brexit emerged as a challenge. With the uncertainty of access to the EU, funds domiciled in or redomiciled to Ireland have proven to be an even more important distribution option.”
And as Paul Kilcullen, head of custody and fund services, at Citi Ireland, highlights: “It is true that, where businesses have to relocate out of London as a result of Brexit, Dublin is proving to be a very attractive location because of the cultural similarities, common language and time zone, and is within an hour’s flight of London.”
“It will be important that post-Brexit, Dublin and London continue to work collaboratively to meet the requirements of the industry and its clients.”
Despite the political disruptions, things have been looking good for Ireland in terms of the market share of fund domiciles.
The Association of the Luxembourg Fund Industry revealed in its 2018/2019 report that Luxembourg holds the largest market share (26.8 percent) out of the 10 leading European UCITS and alternative investment funds domiciles. Ireland comes in a respectable third place holding 16.3 percent of the market share (as of June 2019).
The association also reported some 16 countries attracted what is deemed as “positive” net sales in 2018, with four countries recording net sales larger than €10 billion. Ireland’s net sales for the end of last year stood at a record €47.4 billion. Only time will tell if and how Brexit could affect these numbers, if at all.
Technology
Advancements in technology, especially artificial intelligence (AI) are unprecedented, all over the world. But when we apply this to the context of the back-office, is asset servicing truly where it needs to be to meet the demands and operational challenges of today’s world?
As aforementioned, Ireland, for one, is certainly making the most of the opportunities available to it.
Melíosa O’Caoimh, country head, Ireland at Northern Trust, explains: “Demand for innovative technology solutions is top of the list. Ireland is a hub for financial technology and an important consideration for our existing and prospective clients in the country.”
To understand the level of interest in Dublin’s financial district, you’ve merely had to keep track of how many fintech companies and big banks have moved or expanded their offices to Ireland in recent years.
Colm Heffernan, COO at Fenergo states that in 2018, software was the most popular industry for business graduates in Ireland, with banking in third place.
Heffernan explains: “This combination has contributed greatly to the ongoing fintech revolution in Dublin.”
There are many institutions who have recently opened up a technology hub, or expanded their offices within the capital or in smaller cities.
For example, Opus Fund Services set to open a new office in Wexford, Ireland, creating 100 jobs within the next five years.
It also revealed the official launch of its European fund administration business in Dublin earlier this year following authorisation by the Central Bank of Ireland under the Investment Intermediaries Act.
Elsewhere, FundRock has opened a new office in Limerick, marking the firm’s second office in Ireland.
The new office will serve as a centre of excellence and operational centre to support FundRock’s existing network of offices in Dublin, London and Luxembourg.
In September, Deutsche Börse and its post-trade services provider Clearstream, officially opened its new office in Cork.
Deutsche Boerse suggested that the new office in Cork has become a “vital and successful hub” for the investment funds operations and one of the major locations for Clearstream.
By 2020, Deutsche Börse Group expects around 600 employees to work in the Cork office. In addition, DTCC opened its new office in Dublin back in March.
On 1 March 2019, the European Securities and Markets Authority registered DTCC Data Repository (Ireland) as a trade repository, under the European Market Infrastructure Regulation. The registration came in response to a possible no-deal Brexit.
The future
Uncertainty still clouds opinions regarding Brexit. But looking to the future, there still seems to be some optimism.
Heffernan expects to see companies making “a bigger effort” in balancing the gender gap by engaging more with universities and organisations to recruit women in engineering and technology roles.
He also predicts that more technologies like AI and machine learning “to have a significant impact on regulation”.
Predicting what the next five years would look like, O’Caoimh says Ireland will continue to be “well-positioned to support the evolving needs of our growing EMEA client base. As technology advancements continue to drive innovation in fund administration, the Ireland office will have a key role to play in supporting the rollout of these technologies and implementing best-practices”.
According to Turner, there will be continued growth, but “a change of emphasis in the skillsets required, away from core processing and towards risk management, compliance and technology. Private equity, real estate and exchange-traded funds are likely to continue to expand and Ireland is well placed as a leading hub for servicing these asset classes.”
